Denial of Experimental Treatment Reversed in ERISA Case
MyHealthGuide Source: Todd Leeuwenburgh, Editor, Coordination of Benefits Handbook, Thompson Publishing Group, 2/3/2011, www.thompson.com
Case: Lafferty v. Providence Health Plans, 2011 WL 127489 (D. Ore., Jan. 14, 2011) related to the fees; the underlying case was decided in April 2010.
Editor’s Note: The health plan in this case is not self-funded. However, ERISA is cited by the Court. Many self-funded plans deny coverage and payment for experimental treatment. This case shows the outcome of a specific case when payor denial decisions go beyond what is deemed acceptable.
Preface from Mr. Leeuwenburgh: This case may be instructive to see the boundaries for an experimental treatment denial. If the policy was explicitly stated — we’ll deny your whole episode of care if we unbundle it and find you used any part that was experimental — and if this plan had followed ERISA’s review and appeal procedures do you think the insurer could have justified its denial?Summary
A plan’s failure to follow ERISA review and appeal procedures allowed a federal judge to:
• (1) apply de novo review of the payer’s experimental service denial;
• (2) reverse that denial; and
• (3) tack on more than $134,000 in attorney’s fees.
The case, Lafferty v. Providence Health Plans, related to the fees. The underlying case was decided in April 2010.
Facts of the Case
Joan Lafferty was a participant in the Eugene Freezing and Storage health plan, which was insured by Providence Health Plans.
Providence denied her claims for high-dose chemotherapy for treatment of her rare malignant brain cancer. They were denied because her chemotherapy treatment was enhanced by using Blood Brain Barrier disruption (BBBD). BBBD treatment uses a drug — in this case Mannitol — to disrupt the blood brain barrier, thus allowing chemotherapy drugs to cross the barrier. She was treated using this technique and her condition improved.
While Providence recognized traditional high-dose chemotherapy as the standard of care, it denied the entire treatment under its experimental treatment exclusion because BBBD was used. The insurer took the position that because long-term studies had not been completed and the treatment was not approved by the Food and Drug Administration, BBBD was not a covered benefit.
It argued that it was right to deny the entire service, because it could not distinguish what was related to the BBBD protocol from what was standard-of-care. (The court would reject that assertion as disingenuous.)
Lafferty brought suit, contending that the chemotherapy and all associated services were covered: the BBBD-enhanced chemotherapy encompassed covered services — such as chemotherapy, injectable medicines and hospitalization. Further, the insurer misapplied its experimental treatment exclusion when it denied the BBBD supplement, she said.
Flagrant Procedural Violations
In April 2010, the U.S. District Court in Oregon reversed the denial and compelled the plan to cover the treatment Lafferty v. Providence Health Plans, 08-CV-6318-TC (April 12, 2010). It found
• (1) Lafferty’s high-dose chemotherapy was a covered benefit under the policy; and
• (2) Providence failed to establish that the BBBD/Mannitol enhancement was experimental.
It reviewed Providence’s denial de novo (“new trial”) instead of for an abuse of discretion because the plan committed flagrant procedural violations of ERISA, including putting several of the same medical team members who issued the initial denial on the appeal review board. Further, the lead medical reviewer for the initial denial (Dr. Corn) served on the appeal board as a non-voting member but he advised committee members what they should do, which improperly influenced the outcome, U.S. Magistrate Judge Thomas Coffin said:
• I find that the significant procedural irregularities in the review process altered the substantive relationship between Providence and Lafferty, thereby depriving Lafferty of the right to appeal and causing substantive harm. Such significant procedural irregularities amount to acts which disregard the underlying purposes of ERISA.
The court said Lafferty should be covered for inpatient costs connected to the standard high-dose chemotherapy. Those included
• (1) her hospital stay;
• (2) x-rays and/or MRI’s;
• (3) IV hydration;
• (4) general anesthesia and intra-arterial cauterization; and
• (5) chemotherapy drugs.
And it rejected Providence’s stance that the addition of BBBD services rendered the entire treatment (including the high-dose chemotherapy, which otherwise would have been covered) experimental, and thus excluded from coverage
The judge took exception to how the insurer relied on CMS/Medicare coverage guide rules saying BBBD was not medically necessary.
While Medicare holds that BBBD is not necessary, it does not deny other anticancer therapy supplemented by BBBD, he noted. Rather, it refuses to pay for Mannitol while covering recognized cancer treatments. Accordingly, Coffin ordered Providence to pay for the standard chemotherapy and associated procedures and services.
Then, Coffin compelled the plan to cover the BBBD/Mannitol infusion as well.
Providence propped its denial on the policy’s definition of an experimental/investigational services. The policy said that determination is made based on a variety of factors.
• We will consider whether the Services are in general use in the medical community in the U.S.; whether the Services are under continued scientific testing and research; whether the Services show a demonstrable benefit for a particular illness or disease; whether they are proven to be safe and efficacious; and whether they are approved for use by appropriate governmental agencies. We determine on a case-by-case basis whether the requested Services will result in greater benefits than other generally available Services, and will not approve such a request if the Service poses a significant risk to the health and safety of the Member.
Providence contended BBBD:
• (1) is not in general use;
• (2) is still under continued research and study, having not completed Phase III studies and not FDA-approved;
• (3) yields medical outcomes that are no better than chemotherapy alone or with radiation; and
• (4) is not proven safe and effective.
In his de novo review, Coffin refuted Providence’s assertions, finding that the treatment met the policy’s definition of medical necessary services. He drew from ample safety and efficacy studies showing the treatment has significant health benefits and offers demonstrable value that exceeds other services. The service is consistent with scientifically based guidelines of national medical research and nationally recognized standards of care, he stated. The fact that Phase III trials are not complete and the FDA has not approved Mannitol was due to the fact that the disease is so rare that there have been no Phase III trials for its treatment, Coffin said.
The court said that the payer had established only one factor — the lack of Phase III trial and FDA approval — out of the many that plan required to be considered, and that was not enough to conclude the service was investigational/experimental.
• I cannot conclude that Providence’s establishment of only one of the criteria in the definition is dispositive of a service being investigational/experimental. Thus, I find that Providence has not met its burden of establishing that BBBD drugs are an experimental treatment.
The payer had already begun to pay some of the BBBD-enhanced chemotherapy sessions. The court ordered the insurer to pay the remaining amount (which was to be determined at the time). In June 2010, Coffin denied Providence’s motion for reconsideration. Lafferty had sued for attorney’s fees and Coffin went on to consider that.
Fees and Costs Awarded
In the January 2011 proceedings, Coffin awarded Lafferty $134,830 in attorney’s fees — split among her three lawyers — and $389 in costs. To arrive at this conclusion he applied a five-part test that balanced five factors, no one of which would be determinant. The analysis went as follows:
• 1) There was no evidence of bad faith by Providence, even though it fell short of ERISA’s review and appeals rules and was found to have abused its discretion. This factor was neutral; it favored neither Lafferty nor Providence. A finding of bad faith is not needed to award attorney’s fees, the judge noted.
• 2) Providence was capable of paying the fees. Providence conceded as much, so that factor weighed in Lafferty’s favor.
• 3) A fee award would deter other payers from denying claims for covered services in conjunction with experimental services. Coffin noted that Providence never explained why it denied Lafferty’s covered chemotherapy treatment. The award would also encourage plans to ensure that internal review processes are free of significant procedural irregularities, Coffin said. This factor weighed in Lafferty’s favor.
• 4) It would helping other participants by clarifying the legal questions about coverage for treatments that have not completed Phase III trials. The award would protect beneficiaries with rare diseases who seek treatment with a component that might not have completed a Phase III trial, Lafferty argued. The payer countered that Lafferty was suing on her own behalf and other beneficiaries could not benefit from such a ruling. The court said while she was suing to acquire benefits, an award could also send a message to plans covering other ERISA participants to be careful in this situation — Providence had failed to explained why the BBBD treatment was “experimental.” This factor weighed in Lafferty’s favor.
• 5) Lafferty’s position had stronger relative merits. Providence never articulated any justification for refusing to pay for Lafferty’s covered high-dose chemotherapy. The arguments Providence prevailed on were small in comparison. Therefore, Coffin gave the relative merits factor to Lafferty.
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